Home prices down 29.3% in California

A report in the SFGate on the state of real estate in the Bay area:

Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area’s median price in July, sending it down nearly 30 percent to a level not seen in more than four years.

A year earlier, just 4.2 percent of existing-home sales were foreclosed properties. The brisk business in bank-owned homes buoyed sales volume, especially in counties with a glut of foreclosures.

The San Francisco area has remained one of the most expensive places to live in California, but the increase in foreclosures are now affecting their bottom line as well.

“There is deep discounting in inland markets that have been slammed by foreclosures,” said Andrew LePage, an MDA DataQuick analyst.

Amped-up foreclosure sales actually could be a plus, hastening a return to normal once the deluge of bank repos ends, LePage said.

“We’re burning through them at a better rate than we were,” he said. “It’s not a bad sign that they’re selling from a market-stability standpoint.”

Spin control alert! You have got to be kidding. Since when is a gut of foreclosures a good thing? Real estate sales in California this summer (the traditional best time for sales) has been dismal and off it's mark from past years numbers.

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said he thinks the foreclosure flood makes the market appear much worse than it really is.

“The headline will read, ‘House prices plunge,’ ” he said. “Actually, what it should read is, ‘Foreclosed house prices plunge.’ The data show a much smaller (price) decline, between 5 percent and 10 percent in the core Bay Area of Silicon Valley, Oakland, Berkeley, San Francisco and Marin (if foreclosure sales are omitted).”

Typical academic statement. Foreclosure home prices are not the only home prices to be plummeting. In the Southern California area, there are duplex homes that just three years ago sold for over $500,000. Today they are worth $360,000. These are NOT foreclosure homes — prices have dropped and all indicators point to the fact that we have not come close to hitting bottom.

Discounted foreclosures are good news for two market segments: investors who see the chance to snap up bargains, and new home buyers who can meet today’s stricter qualifications for getting a mortgage.

This I agree with. Unfortunately many savvy home buyers are waiting this one out. Not jumping into the market right now, when prices most certainly have not reached as low as they will go, is a smart idea.